A masternode is a cryptocurrency wallet also referred to as a full node that contains a copy of the ledger in real-time. Blockchains can be broken down into three types: Proof of work, proof of stake, and a mixture of the two.
The blockchains need a system to process transactions that enables the blockchain to function. But masternodes are different than the functionality of regular nodes.
They go above and beyond in the functionality compared to a node that relays blocks and transactions. Some of the features that made up masternodes include:
- providing a treasury system for crypto
- keeping transactions private
- enabling instantaneous transactions
- enabling governance and voting Masternodes is referred to in short form as MN, and
- they are not standalone.
- They are always in contact with other nodes which make up the decentralized network.
Organizing a Masternode
Masternodes are great for they provide the benefit of earning guaranteed coins with the potential upside of the coin value. Masternodes can be run by anyone; however, there are barriers to entry that have been put in place to prevent fraud or wrong-doings.
The first requirement is to put up collateral – with this, the operators are forced to have a direct stake, it can be lost if ever cheating occurs. It serves as a self-policing measure that keeps fraud to a minimum.
Also, to run a masternode, a user should include their VPS or dedicated server, a dedicated IP address, and enough storage space for saving the blockchain ledger.
Masternodes are very beneficial for crypto investors for they are an on-going revenue source, then earning them interest on their investment.
How to run a masternode?
This varies depending on the currency, but this is a basic checklist one can use as a guide and must be followed to some extent regardless of which currency is selected:
- Buy the number of coins you need for collateral (be sure to buy a little extra to cover transactions fees)
- Install the wallet on your server
- Send your coins or tokens to your wallet
- Setup a node address in your wallet and transfer the coins to the node
- Setup the node.
- Once configured, you’re ready to start the server. At this point, you’ll need the node daemon.
- You’re ready to rock and roll and begin earning coins off your masternode!